Unions and policymakers are ramping up their attacks on the very existence of independent contractor status, insisting that it is nothing more than willful misclassification of employees to deprive them of their rights.
Along with temp workers, part-time workers and independent contractors are lumped together in what is called the "gig economy." Unfortunately for opponents, and their allies like Hillary Clinton who condemn it, the gig economy is gaining in popularity, especially among Millennials, who are expected to make up 50% of the workforce by 2020.
In March Richard E. Griffin Jr., general counsel of the National Labor Relations Board, issued a memo to the board's regional directors asserting that independent contractor status violates federal labor law because it prevents employees from organizing to join a union. In August Griffin directed the NLRB Southern California regional director to order that port drayage carrier Pacific 9 Transportation stop referring to its drivers as independent contractors, and require the company rescind any portions of its agreements with its drivers that purport to classify them as independent contractors, and to post a notice to that effect.
It is unclear how much this will help these drivers, however. The Teamsters union earlier had called a strike against the company that resulted in an agreement with it in May. A court judgment also granted the drivers close to $7 million. On Aug. 27—the day after Griffin issued his directive—Pac 9 filed for bankruptcy protection. Another Southern California port drayage firm under similar pressure, Premium Transportation Services, filed for bankruptcy in March.
Much bigger was the FedEx agreement to pay $240 million to drivers in 20 states who argued they were not independent contractors. This was just one of the lawsuits against FedEx in about 40 states. Although the company is losing some cases and winning others, the Teamsters had trouble persuading drivers to vote to join the union once they won earlier decisions.
Ridesharing companies Uber and Lyft also face growing pressure. The Seattle City Council enacted a law allowing drivers to unionize and compelling the companies to recognize their unions. That law has survived one court challenge but at last report had not gone into effect because of city officials' confusion about how to implement it.
Elsewhere Uber addressed the issue by agreeing to pay 400,000 drivers $100 million while establishing Teamsters-run driver councils in California and Massachusetts for mediating work disputes. The settlement was upheld by a federal appeals court last month.
States and cities like Chicago are looking at other ways to restrict Uber, both because of pressure exerted by competing taxi interests and because of the long-standing desire to collect unemployment and workers' compensation insurance payments by reclassifying ridesharing drivers as employees.
The federal government is more than willing to help states in this endeavor. Since our last update, Pennsylvania, North Carolina and Nebraska have joined 31 other states in signing an agreement with the Labor Department to share information and conduct joint investigations of contractor misclassifications. This means any state misclassification investigation will automatically be expanded to include federal agencies.
If you use independent contractors, what should you do? Although laws and enforcement vary widely across the country, in most cases the issue boils down to how much control you exert over these workers in how they perform their jobs. The more control, the more likely it is they will be considered employees.
The legal landscape is constantly changing and regardless of where you're located, if you use independent contractors make sure a good lawyer regularly reviews your contracts. If you don't, it could cost you big time.
David Sparkman is founding editor of ACWI Advance (www.acwi.org), the newsletter of the American Chain of Warehouses Inc., as well as a member of the MH&L Editorial Advisory Board.
